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Public Pension Funds in Crisis
The financial crisis has blown a hole in the rosy forecasts of pension funds that cover teachers, police officers and other government employees, casting into doubt as never before whether these public systems will be able to keep their promises. This has been foreseeable from the time the pension plans were devised, where a promise was made to pay out for a lifetime from future earnings, while both the length of life and the amount of future earnings is unknowable. Before the crisis, many public pension funds had experimented with risky trading methods. When these melted down, pension funds got burned. "The amount that needs to be made up is enormous," said Peter Austin, executive director of BNY Mellon Pension Services. "Frankly, they are forced to continue their allocation in these high-return asset classes because that's their only hope." Some pension experts say the funding gap has become so great that no investment strategy can close it and that taxpayers will have to cover the massive bill. In 2006, Virginia's pension officials suggested scaling back benefits or requiring current employees to begin paying into the pension fund. The state's lawmakers took no action. Then the crisis hit. Virginia lost 21 percent of the value of its portfolio. The legislature again asleep at the wheel. During the last fiscal year, Ohio's fund lost 31 percent. Its most recent annual report detailed how long it would now take for its investments to put the fund back on track. Officials simply said: "Infinity." and beyond! Posted by: Anguper Hupomosing9418 2009-10-13 |
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